3 Under $30: These Biotech Stocks to Shake Up the Industry

If penny stocks can seem like junk, and hot stocks priced at hundreds of dollars per share seem too high-risk for Average Joe traders, then small-cap stocks trading for under $30 per share may be just the ticket. Todd Campbell of The Motley Fooltalked with The Motley Fool’s Industry Focus: Healthcare analyst Kristine Harjet about three hot healthcare stocks under $30.

With corporate offices in Jersey Isle, U.K., Novocure (NVCR) has U.S. operations in Portsmouth, N.H., Malvern, Penn., and New York City. It also has European operations in Switzerland and Germany, as well as in Japan and Israel. The company has a fourth modality for treating cancer, using electrical fields around a tumor to disrupt the cancer cell’s division. Its device, Optune, was approved by the U.S. Food and Drug Administration (FDA) in 2011.

The company was on its way up anyway, but has garnered more attention since Senator John McCain was diagnosed with glioblastoma (GBM), a rare type of brain cancer. Optune has been approved to treat newly diagnosed GBM in combination with temozolomide chemotherapy.

Campbell, who recently visited company headquarters, says, “They think they can achieve breakeven and potentially profitability just on the glioblastoma approvals alone. You (Kristine) mentioned they’re treating about 1,200 patients now. That’s up substantially from 225 patients in 2014. Revenue was $83 million last year, that’s up 150 percent year over year. And costs are growing much slower than that, because they’ve built up all this infrastructure to commercialize, and now they’re able to leverage more sales against those fixed costs to get themselves closer and closer to profitability.”

Based in Burlington, Mass., the company is waiting for a decision by the FDA in October for its Zilretta, a new treatment for patients with osteoarthritis (OA) of the knee. One of the big advantages of the drug is that it doesn’t appear to cause spikes in blood glucose levels in diabetes that are often associated with steroid injections for OA. If approved, analysts have projected peak sales of $500 to $600 million. If approved for other joint indications, it could hit the magical $1 billion blockbuster mark.

The company has a $780 million market cap. At least some of the interest in the company is related to Zilretta being a non-opioid pain medication, and the current opioid epidemic. Campbell writes, “That’s really the sweet spot that Flexion Therapeutics is targeting, developing a new way to control pain that isn’t an opioid, that can control pain more consistently, and potentially, as a result, reduce the need to rely on these rescue medications which, as we talked about previously in that prior show, it can increase the likelihood of getting addicted and contributing to the opioid epidemic.”

Harjes noted that Flexion is also focused on quality of the drug. “They assumed a hypothetical cost of $500 per treatment, and they used the actual cost of some comparable treatments, some of the more traditional ones and also the hyaluronic acid injections…. So, it improves QALY [a quality of life metric], quality of your life, and it also does it at a lower cost for that improvement. And since this is a chronic treatment, that’s pretty huge, because not only would you find insurers more willing to accept this, but they’re going to accept it year in and year out, and that’s that constantly generating revenue flow, which, especially as the population ages, that’s only going to grow.”

Based in San Diego, much attention is being paid to this company’s ZX008 (Flenfluramine) for a rare type of epilepsy. In mid-July, it announced that it was pushing back its Phase III trial of the drug for about three months. It will enroll an additional 105 patients in both of the two planned Phase III clinical trials. The baseline observation period will last eight weeks, followed by a two-week titration period. It will also hold an optional, long-term, open label extension study.

ZX008 is designed to treat Dravet syndrome, a rare type of epilepsy that starts in infancy. It is characterized by long, fever-related seizures that can be fatal, and do not respond to typical epilepsy medications.

Zogenix has a market cap of about $322 million.

ZX008, if approved, is likely to face GW Pharmaceuticals ’ Epidiolex, which is pending approval in Dravet syndrome. Campbell says, “This is a very small patient population. That’s something people should know. They should also know that ZX008 is a low dose of Flenfluramine, and anyone who’s been around as long as I have, the grey hair, may remember the drug fen-phen from the 1990s, which was an obesity drug. It was unfortunately found that the drug resulted in some cardiac events, and it was pulled from the market back in 1997.”

ZX008 is a very low dose of one of the two drugs in fen-phen, and hasn’t shown evidence of increased cardiac risk. It has, however, shown good efficacy. Epidiolex is a marijuana-based drug from GW Pharmaceuticals.